On Thursday morning (January 4) investors saw red across the board for cannabis stocks after an AP report suggested U.S. Attorney General Jeff Sessions will be dismantling policy from the Obama administration allowing states to police the legal use of marijuana.
It was a slash in share price for everyone–from the major Canadian Licensed Producers (LPs) on the Toronto Stock Exchange to smaller LPs on the TSX Venture and stocks on U.S. exchanges.
At one point of trading on Thursday morning, four of the five LPs on the TSX had losses of over 15 percent in their share price. The Horizons Marijuana Life Science Index ETF closed the market on Wednesday (January 3) at $23.33 and by Thursday the ETF dipped as low as $19.92 resulting from the report on Sessions. As of 11:46 a.m. EST, the ETF dropped 9.30 percent.
Sessions at odds with cannabis legalization
Sessions has been vocal throughout the Trump presidency of his opposition to the legalization of cannabis and the increase of legal businesses related to the market.
Back in 2013, the Obama administration allowed states to begin the process of legalization if their voters wanted it–as long as local officials kept it regulated within their state–through a memo sent out by former Deputy Attorney General Jim Cole. According to Vice News, Sessions had said as recently as November the policy would stay.
Now instead, the Attorney General will allow federal prosecutors to decide the way they want to enforce federal laws against marijuana companies. Cannabis is illegal at a federal level while several states like Colorado, Nevada and most recently California have legalized the sale of marijuana.
According to the publication, this change in policy will allow federal resources to be allocated for the enforcement of federal marijuana laws depending on their stance on cannabis.
“The move by President Donald Trump’s attorney general likely will add to confusion about whether it’s OK to grow, buy or use marijuana in states where pot is legal, since long-standing federal law prohibits it,” the AP said.
Since the start of his presidency, Donald Trump has been less clear on his actual stance on cannabis. Sessions has found himself challenged by the president in the past, yet his stance on cannabis hasn’t been directly attacked by Trump.
Support for legal cannabis is at an all-time high
Late last year a Gallup poll showed 64 percent of Americans support the legalization of marijuana, the highest level of public support for the drug according to Gallup. The poll also included a section showing a majority of Republicans also support the new approach to cannabis.
In its conclusion, Gallup wrote Sessions could be at odds with his own party if current trends on marijuana continued.
Cannabis experts had expressed concern of the day Sessions would crack down on the market’s impending path to full legalization. Last year, however, Scott Boyes, CEO of the MPX Bioceutical Corporation (CSE:MPX; OTC:MPXEF) told the Investing News Network (INN) that concern had left his mind.
MPX also suffered a dip in its shares following the report on the Attorney General. At 12:02 p.m. EST, on the Canadian Securities Exchange stock had gone down 16 percent, while its U.S. counterpart had decreased 15.56 percent.
“Everybody asks you ‘aren’t you worried about Trump and Sessions shutting the industry down?’ Most people in the industry went way past that a long time ago,” Boyes told INN, at the time arguing the potential revenue of this industry would be enough to change the mind of Trump and Sessions.
Update from market closure
After the initial downfall on the markets Thursday morning, the drop eased up a bit for cannabis stocks and its exchange-traded fund (ETF). From the major producers on the Toronto Stock Exchange (TSX), Aphria (TSX:APH; OTCQB:APHQF) saw the biggest drop with a decline of 13.79 percent. Aphria is one of the Canadian LPs with the biggest interest in the US market. A business decision that has put the company in contention with the TSX directly.
Over on the TSX Venture Exchange, the decline was seen with nearly every cannabis stock. Cronos Group (TSXV:MJN) and Organigram (TSXV:OGI) saw dips of nearly 10 percent, while The Supreme Cannabis Company (TSXV:FIRE), had a 7.46 percent drop to its share price. On the Canadian Securities Exchange, two companies with significant interest in the U.S. market had two of the biggest losses of the day. Friday Night Inc. (CSE:TGIF) and CannaRoyalty (CSE:CRZ) declined 20 and 15.84 percent respectively.
The Horizons Marijuana Life Science Index ETF drop also stabilized a bit before the markets closed. Its decrease was 8.66 percent and the ETF is valued at $21.31.
White House clarifies official stance from Trump
During Thursday’s press briefing Press Secretary Sarah Huckabee Sanders said president Trump agrees with Sessions’ decision to change the policy on cannabis.
“The president believes in enforcing federal law. That would be his top priority, regardless of what the topic is, whether it’s marijuana or whether it’s immigration.” Sanders told reporters.
Michael Weiner, a partner at the Dorsey & Whitney law firm and involved lawyer with cannabis companies in Colorado told INN this move by the Trump administration would cause some immediate damage to the cannabis industry.
“I think this move will slow down the growth of the industry over the next six months. Potential investors who are not yet involved in the industry will be reluctant to invest in the industry. Also big business will be more reluctant to get involved,” Weiner said.
Editors note: This story was updated to reflect the new figures once the markets had closed.
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Supreme Cannabis Company is a client of the Investing News Network. This article is not paid-for content.